As in the past, the Census Bureau’s Supplemental Poverty Measure yields a higher poverty rate than the official measure that was the basis for the reports the Bureau issued last month. According to the just-released SPM report, the rate last year was 15.5%, rather than 14.5%.*

This means that about 2.9 million more people — roughly 48.7 million in all — were living in poverty. At the same time, 1.3% fewer people lived in deep poverty, i.e., at or below 50% of the income threshold that determines who’s counted as poor.

These differences as well as the many others reflect the fact that the SPM is constructed differently from the official measure. There’s a brief explanation of how it’s built in the last section below.

Other Shifts in Poverty Rates

We see shifts up and down for state-level rates. For example, the rate for the District of Columbia rises from 19.9% to 22.4%. Rates fall in 26 states and rise in 13. (These reflect three-year averages to compensate for the relatively small sample sizes.)

As in the past, rates also shift for major race/ethnicity groups. Most of the shifts are relatively small. An exception here for Asians, whose poverty rate was 5.9% higher, and for blacks, whose deep poverty rate was 4.6% lower.

The most marked shifts are again for the young and the old.

The child poverty rate drops from 20.4% to 16.4%, reducing the number of poor children by about 2.9 million.

The deep poverty rate for children is less than half the official rate — 4.4%, as compared to 9.3%.

By contrast, the poverty rate for people 65 and older rises from 9.5% to 14.6%.

And the deep poverty rate for seniors ticks up from 2.7% to 4.8%.

Poverty Rates Without Key Federal Benefits

The changes for seniors largely reflect the fact that the SPM factors in medical out-of-pocket costs. But the SPM report also tells us that the senior poverty rate would have been 52.6% without Social Security payments. In other words, Social Security protected about 23.4 million seniors from poverty last year — more than three and a half times as many as were poor.

This is only one of the policy-relevant figures the SPM report provides in a section that shows how poverty rates would change if some particular benefit weren’t counted as income. Some examples Census has helpfully translated into raw numbers:

The refundable Earned Income Tax Credit and Child Tax Credit lifted 8.8 million people out of poverty.

But for SNAP (food stamp) benefits, about 4.8 million more people would have fallen below the poverty threshold.

Unemployment insurance benefits lifted 2 million people over the threshold.

So we see that the much-maligned safety net programs work. But we also see that policy choices have impaired the impacts some of the biggies formerly had.

The anti-poverty impacts of UI benefits shrunk further — a trend dating back to 2010, according to the Center on Budget and Policy Priorities. The number of people the benefits lifted out of poverty last year was nearly half a million fewer than in 2012.

And that was before Congress let the Emergency Unemployment Compensation program die at the end of last year. The new UI figure almost surely reflects reductions it made when it last renewed the program, however.

SPM 101

As I’ve explained before, the SPM is a more complex — and generally viewed as better — poverty measure than the one that’s used for official purposes, e.g., as the basis for the federal poverty guidelines that help determine eligibility for many safety net and other means-tested programs.

The Bureau begins by setting initial thresholds based on what the roughly 33rd percentile of households with two children spend on four basic needs — food, shelter, clothing and utilities.

It then bumps the amount up a bit to account for some other needs, e.g., household supplies, transportation that’s not work-related. It also makes some housing cost adjustments based on differences between major geographic areas and whether households rent or own — and in the latter case, with or without a mortgage.

Next, it deducts for certain other necessary expenses, e.g., work-related expenses, out-of-pocket costs for health care. And, as income, it adds the value of some non-cash benefits that households can use for the four basic needs. It also, for the same reason, folds in the refundable tax credits.

The report I link to at the beginning of this post provides a fuller — and considerably more wonkish — explanation.

* This is the same rate the Census Bureau reported last month. However, most of the official rates in the SPM report differ somewhat because the Bureau has included children under 15 who are unrelated to anyone they’re living with, e.g., foster children. The official measure doesn’t include them as part of a family unit.

I’m using the adjusted rates so we can have apples-to-apples comparisons. But the rates reported last month are those that should be used for other purposes.

UPDATE: The Center on Budget and Policy Priorities reports that the refundable tax credits lifted 9.4 million people out of poverty. This figure, it says, is based on its analysis of the SPM data. I don’t know why it’s higher than the Census Bureau figure I linked to.

We should be used to this by now. The Census Bureau has just reported a higher national poverty rate than the rate it reported in September. According to its Supplemental Poverty Measure, the rate is 16%, instead of 15%, as the official measure indicated.*

This means that somewhat over 2.7 million more people — a total of 49.7 million — were living in poverty last year. On a somewhat brighter note, the percent of people living in severe poverty, i.e., below 50% of the applicable threshold, is again lower — by 1.5% — than the official measure shows.

We again see shifts up and down for state-level rates as well.

For example, the rate for the District of Columbia rises from 19.3% to 22.7%, according to the three-year averages the Census Bureau uses for the SPM. Rates based on the three-year averages dropped in 28 states and increased more than the District’s in five.

As in the past, we also see shifts in rates for different age and race/ethnicity groups. For example, the poverty rate for blacks dips from 27.3% to 25.8%, while the poverty rate for Asians rises from 11.8% to 16.7%.

The poverty rate for non-Hispanic whites is still the lowest, but it’s higher than the official rate — 10.7%, as compared to 9.8%.

The rate changes all reflect differences between the crude, official measure and the SPM, which goes at poverty measurement in a different — and more sensible — way.

I’ll forgo another summary of how the SPM works. I took a stab at one last year and the year before. And the Census Bureau has a more extensive (and wonkish) explanation in its report.

From a policy perspective, both the overall higher poverty rate and the rate shifts are especially important because they show both the impacts and the limits of major federal benefits programs.

So far as the rate shifts are concerned, the most striking are those for the young and the old.

The child poverty rate drops from 22.3% to 18%, reducing the number of children in poverty by about 3.2 million.

For children, the severe poverty rate is less than half what it is under the official measure — 4.7%, as compared to 10.3%.

The poverty rate for seniors rises from 9.1% to 14.8%, increasing the number of poor people 65 and older by nearly 2.5 million.

This seems to me pretty good evidence that the chained CPI, which could still become the new cost-of-living adjustment measure for Social Security benefits, would disadvantage the 36% of seniors who rely almost entirely on them, as well as younger people who receive them because they’re severely disabled.

At this point, however, Social Security remains by far and away the single most effective anti-poverty program we’ve got. The SPM report shows that, without it, 26.6 million more people of all ages would have been poor — and the poverty rate for seniors a whopping 54.7%.

The report speaks to another issue that Congress is debating — and one that it isn’t, but should deal with swiftly.

The hot issue is SNAP (the food stamp program) — not whether to cut it because Congress has already done that, but by how much more.

So it’s useful to know that pre-cut SNAP benefits lifted well over 4.9 million people, including 2.2 million children, out of poverty last year. They were the single most important factor in the marked drop in severe child poverty, the Center on Budget and Policy Priorities reports.

The back-burner issue is the soon-to-expire Emergency Unemployment Compensation program, i.e., cash benefits for workers who’ve been jobless longer than their regular state programs cover.

I may have more to say about this, but will note here that unemployment insurance benefits generally reduced the SPM poverty rate by somewhat less than 1% — about 2.54million people.

UI benefits have lifted fewer and fewer people out of poverty since 2009 — mainly because fewer jobless workers are receiving them, according to a recent CBPP analysis based on other Census figures.

House and Senate negotiators apparently still hope to stop the across-the-board cuts — at least for while. But this is a far cry from an agenda that would bring the very high poverty rate back down to where it was when we rang in the 21st century.

* The SPM report cites 15.1% for the official measure, noting that this is not statistically significant from the previously reported figure. Several other official measure figures in the report also differ from those the Census Bureau earlier reported.

The differences, if I understand correctly, reflect the fact that the SPM universe includes children under 15 who are living in a household with adults to whom they’re not related. For comparability, I’m using the official measure figures in the SPM report here.

New York Times columnist Thomas Edsall recently took a thoughtful tour through a vexatious question: Who is poor? Or more precisely, what measure should we use to decide?

As he indicates, this is more than an abstract issue for wonks to debate. It has immediate consequences for public policy decisions — most immediately perhaps, for the moves toward “reforming” Social Security and Medicare.

Because if fewer seniors are poor than the Census Bureau’s official poverty measure indicates, there’s a case to be made for reducing their benefits and funneling the savings to children and youth.

Not necessarily a good one. And not what Congressional Republicans want to do with the savings. But these are separate stories.

As I’ve said countless times, everyone knows the official measure is outdated — and was over-simple to begin with.

One the one hand, it takes account of more income sources and, on the other hand, certain necessary expenses, e.g., taxes, out-of-pocket medical costs, child care and work-related transportation.

Then it adds and subtracts from what families at the 33% spending level pay for four basic needs — food, clothing, shelter and utilities.

The end result is a significant increase in senior poverty and a smaller drop in the child poverty rate.

Right-wing conservatives have argued for some time that the official poverty rate is grossly misleading — and the SPM rate worse — because people they classify as poor enjoy a standard of living that’s a far cry from what we think of as genuine deprivation.

This is a crude — and misleading — version of a consumption-based poverty measure. The details of what economists have done to come up with such a measure — or in some cases, a framework for developing one — are far beyond my expertise.

The basic notion, however, is that what people consume or spend is, over time, a better measure of their material well-being (or lack of same) than their income, whether it includes the value of in-kind benefits or not.

And besides, people often understate their income on surveys like those the Census Bureau uses, says economist Bruce Meyer, a lead proponent of the consumption-based method.

He and James Sullivan, also an economist, argue, among other things, that both the official poverty measure and the SPM overstate poverty among the elderly, mainly because seniors are more likely than others to be spending out of savings and not spending on some big-ticket items because they own them outright, e.g., homes and cars.

When Meyer and Sullivan use their method, the poverty rate for seniors becomes 3.2% in 2010, as compared to 9% according to the official measure and 15.9% according to the SPM.

Shawn Fremstad at the Center for Economic and Policy Research has proposed an even more complex framework. The object, if I understand it correctly, would be to capture both a lack of basic economic security and deprivation — or hardship — based on our evolving standard of living.

Thus, the “amenities” that the Heritage Foundation cites as proof that most officially-poor Americans aren’t poor become necessities when experts and we, the general public, view them as such.

This hearkens back to a very old idea. Adam Smithwrote, in 1776, that he understood “necessaries” as “not only the commodities necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even the poorest, to be without.”

James Cassidy, among others, has used it to argue for a relative definition of poverty — somewhat like the SPM, but with a far higher poverty threshold.

Cassidy suggests half the median household income. This could be adjusted for different household sizes, he says, as the Census Bureau already does for its poverty thresholds.

The OECD, an organization consisting mainly of highly-developed countries, does something of this sort for its poverty measure. It sets its poverty line at 50% of median income and then calculates the gap between that and the average income of people who fall below it.

Countries within the European Union also use a percent of median or average income. The percents vary, and some countries use multiple measures.

Ireland, for example, begins with the EU-wide at-risk of poverty line — 60% of median income. Then it calculates the percent of people below it who can’t afford 11 specific items and activities, e.g., new clothes, keeping the house warm.

In all these cases, poverty is conceived of as deprivation, relative to the country’s standard of living.

EU policy, however, pairs low income and/or material hardship with common consequences — not only practical disadvantages like unemployment, social exclusion and restricted access to “fundamental rights.”

This concern with inequality and social exclusion is the fundamental rationale for a measure that will always define some people as poor.

Exactly what the Heritage Foundation so ferociously objects to, since it tends to justify continuing government spending on anti-poverty and upward-mobility programs.

The basic issue, in other words, isn’t how to most accurately measure poverty. It’s how we want to define poverty itself — and to what end.

As Professor Robert Haveman wrote about 20 years ago, “Defining poverty is not just a matter of measuring things in the right way; it also requires fundamental social judgments, many of them with moral implications.”

This is why I think the measurement debate won’t get settled — and why it’s something we all have a stake in.

Another round of news on poverty in the U.S. — this time from the Census Bureau’s latest report on the results of analyses using its Supplemental Poverty Measure.

Once again, the national poverty rate is higher than the rate the Bureau earlier reported, using its official measure — 16.1%, as compared to 15.1%.

In other words, about 3 million more people — a total of nearly 49.7 million — were living in poverty last year.

On the other hand, the percent of people living in extreme poverty, i.e., below 50% of the applicable threshold, is 1.5% lower than the official measure shows.

We get a mixed picture for state-level poverty rates, for which the Bureau uses three-year averages. Some of the rates are higher than the official rate. Some lower.

The rate for the District of Columbia rises sharply — from 19% to 23.2%. This is higher than the rate for any state except California.

As I’ve written before, the official measure sets poverty thresholds at three times the annually adjusted costs of what used to be the U.S. Department of Agriculture’s cheapest food plan.

The SPM starts from the costs of basic living expenses, adjusted for differences among major geographic areas and also differences in living situations, e.g., renting versus owning.

To these, it adds some other “necessary expenses,” e.g., payroll taxes, health care co-pays and other out-of-pocket costs.

On the other side of the ledger, it takes account of not only cash income, but some “near-money” federal benefits like tax credits and also some in-kind benefits, e.g., food stamps, two forms of child nutrition assistance, housing subsidies.

And it uses actual household size, rather than counting only household members who are related to one another, as the official measure does.

These differences explain not only the difference between the overall SPM rate and the official rate, but shifts in rates for different age and race/ethnicity groups.

We see, for example, that:

The child poverty rate drops from 22.3% to 18.1%, reducing the number of children in poverty by about 3 million.

The poverty rate for seniors rises from 8.7% to 15.1%, increasing the number of poor people 65 and older by somewhat more than 2.6 million.

The poverty rate for blacks drops from 27.8% to 25.7% — still far higher than the non-Hispanic white rate of 11%, but now 2.3% lower than the rate for Hispanics.

The poverty rate for Asians rises from 12.3% to 16.9% — the largest percent change for any race/ethnicity group reported.

For children, the extreme poverty rate is less than half what it is under the official measure — 5.1%, as compared to 10.3%.

For seniors, however, the extreme poverty rate rises — from 2.3% to 4.3%.

This year’s report is unusually timely because it gives us a read on the anti-poverty effects of some benefits that are at immediate risk. It tells us that:

Food stamp benefits lifted more than 4.6 million people, including about 2.1 million children, out of poverty last year.

Well over 8.6 million more people, including nearly 4.7 million children, would have fallen below the poverty threshold if their family’s disposable income hadn’t been boosted by refundable tax credits.

Unemployment insurance benefits kept nearly 3.4 million people out of poverty — mostly adults, but about 963,400 children too.

And Social Security — the single most effective anti-poverty program we’ve got — accounted for 25.6 million fewer poor people than there would have been without its benefits. Poverty rates for all age groups would have been higher. The rate for seniors would have soared to 54.1%.

As you’re well aware, the Bush-era tax cuts are expiring. We can be quite confident that most will be renewed.

But Congressional Republicans want to extend earlier versions of the refundable Earned Income Tax Credit and Child Tax Credit, not the expanded versions that have made a significant difference to low-income working families.

The federal program that funds unemployment insurance benefits for longer-term jobless workers will also soon expire. Some two million workers and their families may face the new year with no source of cash income.

Lead Republicans in Congress are about to sit at the bargaining table with their Democratic counterparts and White House officials to thrash out an alternative to the so-called fiscal cliff.

They say they’ll be amenable to increased revenues (not to be confused with higher tax rates for the wealthiest 2%).

These recommendations would cut Social Security retirement benefits in several different ways. With the average benefit now only $1,230 a month, we could see more seniors in poverty if the Democrats don’t hold firm to the position they’re taking now.

NOTE: A couple of the benefits impact figures reported by the Center on Budget and Policy Priorities are a bit higher than mine. This is also true for figures reported by the Center for American Progress. I’m at a loss to explain the discrepancies.

Next week, the Census Bureau will issue the first of its annual reports. Economists surveyed by the Associated Press predict that the poverty rate will rise again.

Two recent blog posts tell us that whatever the Bureau reports next week — or later, when it issues the results of its more detailed American Community Survey and its supplemental poverty measure — will understate the number of poor people in America.

Another Problem With the Poverty Thresholds

The poverty rate we generally read about is based on a set of thresholds the Census Bureau uses.

The thresholds matter not only because they’re our main source of poverty data, but because they’re the basis for the federal poverty guidelines. They thus ultimately determine eligibility for a wide range of safety net programs.

It’s common knowledge that the thresholds are a crude, out-dated poverty measure — three times what the cheapest U.S. Department of Agriculture food plan cost a family of four in the mid-1960s, adjusted annually for inflation.

Blogger Evan Soltas — a super-wonkish undergraduate, even by Princeton standards — adds a new wrinkle. The inflation adjustments themselves, he says, cause the Census Bureau to under-count the poor.

The Bureau uses the CPI-U (Consumer Price Index for All Urban Consumers) to adjust its thresholds. The CPI-U reflects the cost of a market basket of goods and services commonly purchased by people who live in metropolitan areas.

But, says Soltas, the market basket of goods and services purchased by people in the bottom fifth of the income scale is different. And its costs have risen significantly more than the CPI-U.

Any safety net program that indexes to the CPI-U has thus effectively cut benefits by the same 12%, Soltas says. I assume this includes all the programs that use the poverty guidelines.

More than 30 federal programs do. Some state programs also. Seems we’ve got a big problem then — different from the big problems we already knew.

A Problem With the Supplemental Measure Too?

The Census Bureau’s supplemental poverty measure takes an altogether different approach to the thresholds, basing them on the 33rd percentile of what households with two children spend on four basic needs — food, clothing, shelter and utilities — plus a multiplier to accommodate the rest.

It also factors in some other “nondiscretionary expenses,” on the one hand, and major federal benefits that don’t come to recipients as cold cash, e.g., tax credits, food stamps.

The results are commonly viewed as a big improvement over the official Census figures. Shawn Fremstad at the Center for Economic and Policy Research says not necessarily.

In 2010, the child poverty rate was 4.3% lower under the SPM than the official measure.

But look, says Fremstad, at USDA’s food insecurity rate — the “most established measure” we have of “direct deprivation.”

According to Fremstad, the 2010 food insecurity rate for children was 20.2% — closer to the official poverty rate than the SPM rate. An even smaller difference between the food insecurity and official poverty rates for seniors.

Fremstad thinks the SPM rate for seniors is about right. The child poverty rate isn’t because it fails to capture the unique costs of meeting children’s “basic needs for care and healthy development.”

No one, I think, could argue with that. Whether the food insecurity rate Fremstad cites reflects “direct deprivation” experienced by children is another matter.

We know a family can be food insecure even if it always has the resources to buy enough food to keep children from going hungry. Adults will skip or scrimp on meals first, as the USDA data clearly show.

Fremstad is comparing the child poverty rates with the food insecurity rate for households with children. The food insecurity rate specifically for children is just under half that.

So it’s not food that most officially poor children are missing, though we’ve disturbing reports of children showing up at school hungry.

It’s those other investments in their healthy development — the parental attention, high-quality child care and other resource-based influences that account for wide income disparities in school readiness among kindergarteners and subsequent academic performance.

Hard to imagine the Census Bureau could measure these. But Fremstad seems to think it should try. Because it will otherwise “continue to define deprivation down for America’s children.”

So how many poor people are there in the U.S.? We have a new answer from the Census Bureau, which has just released a report based on its supplemental poverty measure.

According to the SPM, 49.1 million people in America were poor in 2010 — 16% of the population. That’s about 2.9 million — 0.9% — more than the Bureau reported based on the official poverty measure.

However, the Bureau’s earlier report doesn’t include unrelated individuals, i.e., people not living with relatives, who are under 15. Folding them in, as the SPM report does, nearly 2.5 million — 0.8% — more people were poor.

Poverty Rate Shifts

Some of the breakout figures are also markedly different from those based on the official measure.* For example:

The child poverty rate drops from 22.5% to 18.2%, reducing the number of children in poverty by about 3.2 million.

The poverty rate for seniors rises from 9% to 15.9%, increasing the number of poor people 65 and older by somewhat more than 2.7 million.

The poverty rate for blacks drops from 27.5% to 25.4% — still far higher than the non-Hispanic white rate of 11.1%, but now 2.8% lower than the rate for Hispanics.

The poverty rate for Asians rises from 12.1% to 16.7% — by far and away the largest percent change for any race/ethnicity group reported.

The percent of people in extreme poverty, i.e., with incomes below 50% of the threshold, drops from 6.8% to 5.4%.

For children, the extreme poverty rate is barely more than half what it is under the official measure — 5.3%, as compared to 10.4%.

For seniors, however, the extreme poverty rate rises from 2.5% to 4.6%.

Both the gap in overall poverty rates and the shifts for specific groups reflect profound differences in the way the official measure and the SPM set the poverty threshold and also in the way they determine who’s above and who’s below it.

Brief overview here of something that’s really quite complicated.

Poverty Thresholds

The official poverty measure is three times the cost of what used to be the U.S. Department of Agriculture’s cheapest meal plan for a two-adult-two-child family, with adjustments for inflation since the measure was developed in the early 1960s.

The SPM instead sets the threshold at the 33rd percentile of what households with two children and any number of adults spend on food, clothing, shelter and utilities — far more realistic, since food no longer accounts for anything close to a third of basic living expenses.

The total for these is multiplied by 1.2 to accommodate other basic needs, e.g., household supplies, transportation for purposes other than work.

The SPM then makes adjustments for shelter costs based on whether households rent or own — and if own, with or without a mortgage.

These costs are also adjusted to account for differences among geographic areas — obviously needed, since housing costs far more in New York City than in, say, Mobile, Alabama.

Definition of Household

The SPM adopts a more flexible view of who should be counted as part of a household.

For the official measure, a household consists of all related individuals living at the same address. The SPM also includes unrelated individuals living there — foster children, for example. Also what the Bureau refers to as “cohabitors,” i.e., domestic partners, and their relatives.

Income Calculation

The third big difference is the way income is calculated. For the official measure, only before-tax cash income counts — wages, of course, but also cash benefits from programs like unemployment insurance and Social Security.

For the SPM, “near-money federal benefits” for the four big expenditure categories also count. Tax credits are included here.

On the other hand, the SPM recognizes what the Bureau calls “nondiscretionary expenses” — payroll and income taxes, child care and certain other work-related expenses, child support payments and medical out-of-pocket expenditures.

These are all deducted from the expanded income calculated to arrive at the bottom line used to determine whether a household is above or below the poverty threshold.

Why the Nuts and Bolts Matter

Once we understand the SPM, the poverty rate shifts make sense. Or rather, we can make them make sense by applying what we know about discrete populations and the federal policies the measure takes account of.

This is what the SPM is supposed to help us — and policymakers — do. And though it’s still a work in progress — and subject to criticisms from both left and right — I think it does the job pretty well.

Surely a whole lot better than the official measure we’re still stuck with.

* All the comparisons below come from the SPM report. The official measure rates are, therefore, in some cases, different from those in the CPS report.

Blog In Brief

Hi! I'm Kathryn Baer. This blog is one way I use my skills and experience to support policies that will reduce the hardships poor people suffer and the causes of poverty. You can find out more about me here .